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Acceptance 
Primer     .^v 


\  k^  i--  "^  ^  V 


Foreign     1  rade 

Banking    Corporation 

"^  inerica's  Pioneer  Discount  Bank" 
35  WaU  Street  New  York 


Digitized  by  the  Internet  Archive 

in  2007  with  funding  from 

IVIicrosoft  Corporation 


http://www.archive.org/details/acceptanceprimerOOforerich 


Acceptance  Primer 


7^     Foreign  Trade 
Banking  Corporation 

"America's  Pioneer  Discount  Bank'' 

35  Wall  street,  New  York 


^1 


4t 


Copyright  1918 
_p       Foreign  Trade  Banking  Corporation 
New  York 


"By  enlarging  the  field  for  the  sale  of  such  paper 
there  will  be  promoted  the  establishment  of  a  general 
discount  market  which  is  universally  recognized  as  an 
important  element  in  the  improvement  of  American 
banking  conditions." 

Governor  Harding, 
Of  the  Federal  Reserve  Board, 


This  booklet  aims  to  bring  together  some  of  the  more 
salient  facts  bearing  on  the  use  of  Acceptances. 

The  numerous  inquiries  received  by  this  Bank  indicate 
a  demand  for  elementary  information.  This  brief  sum- 
mary seeks  to  answer  this  demand,  to  describe  in  simple 
terms  what  the  Acceptance  is,  how  it  is  used,  and  what 
recommends  its  use  as  the  ideal  credit  instrument. 

In  supplying  this  information,  the  Foreign  Trade 
Banking  Corporation  hopes  it  may  contribute  to  the 
growing  recognition  of  the  advantages  of  the  Accept- 
ance. 

Such  recognition  is  certain,  among  other  things,  to 
have  as  a  result  the  strengthening  of  the  country's  finan- 
cial and  economic  condition — its  ability  to  adjust  itself 
to  the  strain  of  war  and  to  meet  its  competitors  in  the 
*  *  war  after  the  war. ' ' 


"The  Acceptance  is  the  standard  farm  of  paper 
in  the  world  discount  market  and  both  on  this 
account  and  because  of  its  acknowledged  liquidity 
earns  a  preferential  rate." 

Federal  Eeserve  Board 


What  the  Acceptance  Is 


The  Acceptance  has  been  defined  as  a  draft  or 
bill  of  exchange,  payable  at  a  fixed  or  determinable 
future  time,  the  obligation  to  pay  which  has  been 
acknowledged  in  writing  on  the  face  of  the  bill  by 
the  person  to  whom  it  is  addressed. 

It  is  a  readily  negotiable  certificate  of  indebt- 
edness which  is  to  be  liquidated  at  a  definite  future 
date. 

It  is  two-name  paper,  the  acceptor  being  pri- 
marily liable. 

It  is  essentially  self-liquidating.  In  its  chief 
applications,  it  utilizes  goods  as  the  basis  of  credit. 
Based  on  the  sstlgf  of  merchandise  which  in  turn 
will  be  sold,  it  provides  automatically  the  funds 
with  which  to  pay  the  obligation  at  maturity. 


Federal  Reserve  Definitions 

The  present  status  of  the  Acceptance  in  the 
United  States  is  largely  determined  by  the  Federal 
Reserve  Act,  as  amended. 


M 


F'P  R;E.I  a  N  l/K^  J^yBA  NKING    CORPORATION 

In  the  regulations  setting  forth  the  conditions 
under  which  Member  Banks  of  the  Federal  Eeserve 
system  are  permitted  to  T)t  drafts,  rediscount, 
or  purchase  Acceptar  »"  ^aid  down  the  prin- 

ciples chiefly  governii  iployment. 

Two  kinds  of  Accept  ^?  •iie  in  use — the  Trade 
Acceptance  and  the  Bartn>-j±Weptance, 

The  regulations  of  the  Eeserve  Act  define  these 
terms  as  applied  for  the  purposes  of  the  Act. 


The  Trade  Acceptance, 

The  Trade  Acceptance  is  defined*  as  a  special 
form  of  the  bill  of  exchange,  namely : 

'*A  bill  of  exchange,  drawn  by  the  seller  on  the  purchaser 
of  goods  sold,  and  accepted  by  such  purchaser. ' ' 

A  "bill  of  exchange"  as  used  in  this  definition  is 
described  as  "an  unconditional  order  in  writing 
addressed  by  one  person  to  another,  other  than  a 
banker,  signed  by  the  person  giving  it,  requiring 
the  person  to  whom  it  is  addressed  to  pay,  in  the 
United  States,  at  a  fixed  or  determinable  future 
time,  a  sum  certain  in  dollars  to  the  order  of  a 
specified  person." 


The  Bank  Acceptance. 

The  Bank  Acceptance  is  defined*  as  a  bill  of 
exchange,  of  which  the  acceptor  is  a  bank  or  trust 

♦Regulation  B,   series  of  1917. 


Americans  Pioneer  I?i^c|yNT  Bank 

» •»•  '^ 

company,  or  firm,  person,  company  or  corporation 

engaged  in  the  business  of  granting  bankers'  ac- 
ceptaniie  credits. 


How  the  Tra      /acceptance  is  Used 

The  business  practice  involved  in  the  use  of  the 
Trade  Acceptance  is  simple.  The  following  exam- 
ple is  typical : 

1.  A,  the  seller  of  the  goods,  consummates  a  bargain 
with  the  buyer,  B.  The  amount  due  is  agreed  upon, 
with  a  definite  term  for  payment. 

2.  A  draws  a  bill  upon  B,  covering  the  amount  of  money 
due  and  definitely  indicating  the  date  of  maturity. 

3.  B,  provided  he  is  satisfied  that  the  conditions  of  the 
sale  have  been  complied  with,  accepts  the  bill  by 
writing  or  stamping  across  its  face  "Accepted,"  the 
date  and  place  of  payment,  and  his  name,  and  re- 
turns it  to  the  seller. 

4.  A  may  hold  the  Acceptance  until  maturity,  and  then 
submit  it  to  B  for  payment. 

5.  Or,  A  may  discount  the  Acceptance  and  it  may  find 
several  purchasers*  i)ef ore  presentation  for  payment 
at  maturity  to  B. 

6.  B  pays  at  maturity. 


•It  is  in  the  interest  of  maintaining  the  character  of  the  Acceptance 
in  its  role  as  a  negotiable  credit  medium,  for  the  protection  of  its 
purchasers,  that  the  requirements  of  "eligibility"  are  prescribed  under 
the  Federal  Reserve  Act.     See  page  10. 


t 

Foreign   T^feAPE  Banking  Corporation 

The  Trade   Acceptance    Distinguished 
from  the  Note  or  Sight  Draft 

The  Trade  Acceptance  is  free  from  objectionable 
associations  sometimes  attached  to  the  promissory 
note  or  sight  draft. 

It  shows  on  its  face  that  it  is  given  for  a  purchase  and 
not  for  a  loan;  nor  does  it  cover  a  past-due  account. 

It  is  confined  to  credit  obligations  arising  from  the  sale 
of  goods,  and  it  has  a  definite  maturity  fixed  as  an  ele» 
ment  of  a  current  transaction.     , 

In  a  financial  statement,  "Acceptances  Payable" 
are  an  indication  that  the  firm's  business  is  so 
ordered  as  to  enable  it  to  pay  its  accounts  when 
due. 

How  the  Bankers'  Acceptance  is  Used 

The  Bankers'  Acceptance  enables  the  drawer  of 
a  bill  to  obtain  use  of  a  bank's  credit. 

The  buyer  of  merchandise,  for  instance,  arranges 
with  a  bank  to  "accept"  the  drafts  of  the  seller 
from  whom  he  buys.  An  export  transaction,  a  class 
in  which  these  Acceptances  are  largely  used,  will 
illustrate  the  procedure  in  one  of  its  forms,  of 
which  there  are  many : 

8 


A  ^^Documentary  BilV^ 

The  foreign  buyer  arranges  an  ''acceptance  credif  by 
means  of  a  letter  of  credit  from  his  own  bank  to  an 
American  bank.  This  authorizes  acceptance  by  the 
American  bank  of  drafts,  under  specified  conditions, 
drawn  on  the  bank  by  the  American  exporter,  with  docu- 
ments attached. 

The  bank  accepts  the  drafts  when  presented,  takes  pos- 
session of  the  documents,  and  forwards  them  to  the 
foreign  buyer's  bank. 

The  Acceptance  may  now  be  discounted  for  the  exporter, 
who  thus  receives  cash  for  the  goods  he  has  shipped, 
and  the  Acceptance,  as  a  negotiable  instrument,  may 
pass  through  the  hands  of  several  purchasers,  to  be 
finally  presented  at  maturity  by  its  holder  to  the  accept- 
ing bank. 

This  bank  will  be  reimbursed  through  the  foreign  bank 
by  the  buyer,  who,  in  the  meantime,  has  had  a  credit 
for  the  period  elapsing  to  the  bilPs  maturity  and  has 
had  an  opportunity  to  receive  the  goods. 

Such  an  Acceptance,  as  evidence  of  eligibility,  usually 
has  stamped  across  its  face: 

"This  acceptance  grows  out  of  a  transaction  involving 
the  importation  or  exportation  of  goods.'' 


A  Liquid  Investment 

The  Bank  Acceptance  is  one  of  the  most  liquid 
forms  of  investment. 

Essentially  self -liquidating,  it  is  usually  of  short 
maturity,  the  majority  of  these  instruments  matur- 
ing in  ninety  days  or  less. 

It  is  certain  to  be  paid,  banking  institutions 
being  of^ssured  standing. 


What  are^'Eligible  Acceptances '? 

Acceptances  are  referred  to  as  "eligible"  when 
they  may  be  purchased  by  the  Federal  Reserve 
Banks.    The  basic  requirements  of  eligibility  are: 

1.  The  acceptance  must  arise  from  an  actual  commer- 
cial transaction,  domestic  or  foreign. 

2.  It  must  be  unconditional;   that  is,  an  unconditional 
bill,  unconditionally  accepted. 

3.  It  must  be  for  a  definite  amount  of  money. 

4.  It  must  possess  a  definite  maturity. 

These  requirements  are  set  forth  specifically  in 
the  Federal  Eeserve  Board  regulations,  with  their 
definitions  of  Acceptances. 

FEDERAL  RESERVE  REGULATIONS 

General  Character  of  Eligible 
Acceptances 

The  Federal  Reserve  Board  prescribes*  that  in 
general  to  be  eligible  for  purchase  by  Federal  Re- 
serve Banks,  an  Acceptance 

♦Regulation  B,  series  of  1917. 

10 


Americans  Pioneer  Discount  Bank 


''Must  not  have  been  issued  for  carrying  or  trading  in 
stocks,  bonds,  or  other  investment  securities,  except 
bonds  and  notes  of  the  Government  of  the  United  States. 

''Must  not  be  a  bill,  the  proceeds  of  which  have  been 
used  or  are  to  be  used  for  permanent  or  fixed  invest- 
ments of  any  kind,  such  as  land,  buildings,  or  machin- 
ery, or  for  investments  of  a  merely  speculative  character. 

"Must  have  been  accepted  by  the  drawee  prior  to 
purchase  by  a  Federal  Reserve  Bank. 

unless  it  is  accompanied  and  secured  by  shipping 
documents  or  by  a  warehouse,  terminal,  or  other 
similar   receipt   conveying   security   title. 

"May  be  secured  by  the  pledge  of  goods  or  collateral, 
provided  it  is  otherwise  eligible.'' 


Eligible  Trade  Acceptances 

A  Trade  Acceptance  must  conform  to  the  Board's 
definition  of  this  instrument,  and  the  following 
more  specific  requirements  must  also  be  met;  it 

"Must  have  arisen  out  of  an  actual  commercial  trans- 
action, domestic  or  foreign;   that  is,  it — 

Must  be  a  bill  which  has  been  issued  or  drawn 
for  agricultural,  industrial,  or  commercial  pur- 
poses or  the  proceeds  of  which  have  been  used, 
or  are  to  be  used  for  the  purpose  of  producing, 
purchasing,  carrying,  or  marketing  goods  in  one 
or  more  of  the  steps  of  the  process  of  production, 
manufacture,    or   distribution. 

"It  must  have  a  maturity  at  time  of  purchase  of  not 
more  than  ninety  days,  exclusive  of  days  of  grace.'' 


Evidence  of  Eligibility, 


"A  Federal  Reserve  Bank  shall  take  such  steps 
as  it  deems  necessary  to  satisfy  itself  as  to  the 
eligibility  of  the  bill  offered  for  purchase,  unless 
it   presents  prima  facie   evidence   thereof 

11 


Foreign  Trade  Banking  Corporation 


"Or   bears   a   stamp    or   certificate    affixed   by    the 

acceptor   or    drawer   showing   that    it    is   a   Trade 

Acceptance." 

(This    usually     reads:       "The    obligation     of    the 

acceptor    hereof    arises    out    of    the    purchase    of 

goods    from    the    drawer.") 

The  Trade  Acceptance  must  be  endorsed  by  a  member 

bank, 

Or   a   satisfactory   statement   of  the   financial   condition 

of  one  or  more  of  the  parties  to  the  transaction  must 

be  furnished. 

Eligible  Bankers'  Acceptances 

A  Bankers'  Acceptance^  to  be  eligible,  must  be 
such  as  described  in  the  Board's  definition,  and 
must  meet  the  following  requirements,  additional 
to  those  holding  for  acceptances  in  general ;  it 

"Must  have  a  maturity  at  time  of  purchase  of  not  more 
than  three  months,  exclusive  of  days  of  grace, 
*'Must  have  been  drawn  under  a  credit  opened  for  the 
purpose    of    conducting,    or    settling    accounts    resulting 
from,  a  transaction  or  transactions  involving — 

(1)  "The  shipment  of  goods  between  the  United 
States  and  any  foreign  country,  or  between  the 
United  States  and  any  of  its  dependencies  or  in- 
sular possessions,  or  between  foreign  countries,  or 

(2)  "The  shipment  of  goods  within  the  United 
States,  provided  the  bill  at  the  time  of  its  ac- 
ceptance is  accompanied  by  shipping  documents, 
or 

(3)  "The  storage  within  the  United  States  of 
readily  marketable  goods,  provided  the  acceptor 
of  the  bill  is  secured  by  warehouse,  terminal, 
or  other  similar  receipt,  or 

(4)  "The  storage  within  the  United  States  of 
goods  which  have  been  actually  sold,  provided 
the  acceptor  of  the  bill  is  secured  by  the  pledge 
of  such  goods. 

"Or  it  must  be  a  bill  drawn  by  a  bank  or  banker  in 
a  foreign  country  or  dependency  or  insular  possession  of 
the  United  States  for  the  purpose  of  furnishing  dollar 
exchange. 

"In  this  latter  case  the  bank  or  banker  draw- 
ing the  bill  must  be  in  a  country,  dependency, 
or  possession  whose  usages  of  trade  have  been 
determined  by  the  Federal  Reserve  Board  to  re- 
quire  the   drawing  of  bills  of  this   character." 

12 


Americans  Pioneer  Discount  Bank 

Evidence  of  Eligibility. 

A  Federal  Reserve  Bank  must  be  satisfied  either 
by  reference  to  the  Acceptance  itself  or  other- 
wise, that  it  is  eligible  for  purchase. 

"Satisfactory  evidence  of  eligibility  may  consist 
of  a  stamp  or  certificate  affixed  by  the  acceptor, 
in  form  satisfactory  to  the  Federal  Reserve 
Bank. 

"No  evidence  of  eligibility  is  required  with  re- 
spect to  a  bill  accepted  by  a  national  bank. 

''Bankers'  Acceptances,  other  than  those  accepted  or 
endorsed  by  Member  Banks,  shall  be  eligible  for  purchase 
only  after  the  acceptor  has  furnished  a  satisfactory 
statement  of  financial  condition  in  form  to  be  approved 
by  the  Federal  Reserve  Board,  and 

''Has  agreed  in  writing  with  a  Federal  Reserve  Bank 
to  inform  it  upon  request  concerning  the  transactions 
underlying  such  acceptances.'' 


Benefits  Conferred  by  Eligibility 


Marketability  Assured 

The  eligibility  regulations  of  the  Federal  Re- 
serve Board  aim  at  maintaining  the  character  of 
the  Acceptance  as  a  fully  and  freely  negotiable 
credit  instrument.  They  thereby  serve  to  protect 
the  purchaser  of  the  paper. 

"Eligibility"  provides  protection  for  the  purchaser  of 
the  Acceptance,  which  is  confined  not  alone  to  his  knowl- 
edge of  the  names  attached  to  the  paper  but  is  assured 
by  the  fact,  as  shown  on  its  face,  that,  having  con- 
formed to  the  Board's  requirements,  the  Acceptance  can 
be  readily  rediscounted  at  Federal  Eeserve  Banks. 

13 


Foreign  Trade  Banking  Corporation 

Self -Liquidating  Character  Made  Certain 

The  conditions  demanded  by  eligibility  are  such 
as  to  make  the  Acceptance  essentially  self-liqui- 
dating. The  merchandise  transaction  involved 
virtually  finances  itself. 


Federal  Reserve  Board's  Encouragement 
to  Use  of  Acceptances 

The  Federal  Keserve  Board  has  steadily  encour- 
aged development  of  the  Acceptance.  It  has  by  its 
rules  and  regulations  created  conditions  giving 
special  advantages  to  the  Acceptance  as  a  nego- 
tiable instrument  of  credit. 

The  Board  has  established  a  preferential  rate  in  its 
favor. 

It  has  enlarged  the  facilities  for  rediscount. 

It  has  given  practical  freedom  from  the  limitation  placed 
upon  banks  to  loan  to  one  person  or  concern  upon  single- 
name  paper  to  the  extent  only  of  10  per  cent  of  the 
bank's  capital  and  surplus. 

It  has  thus  broadened  banking  facilities.  The  borrower's 
discounting  ability  is  made  practically  unlimited  so  far 
as  he  can  produce  satisfactory  Trade  Acceptances  of  his 
customers. 


14 


Advantages  of  the 
Trade  Acceptance  Method 


The  banker,  manufacturer  and  merchant,  and 
the  commercial  and  financial  structure  of  the  coun- 
try as  a  whole  are  benefited  through  the  broad 
adoption  of  the  Acceptance — the  premier  self- 
liquidating,  two-name  paper — in  the  conduct  of 
domestic  and  foreign  trade. 


Advantages  to  the  Banker 

The  Trade  Acceptance  method  is  of  advantage 
to  the  banker  in  that: 

It  lessens  his  lending  hazard 

By  substituting  two-name  paper  for  unsecured  single- 
name  paper. 

By  assisting  him  to  measure  his  risks  more  accurately, 
showing  the  true  credit  standing  of  both  seller  and  buyer 
of  goods. 

By  dividing  risks,  giving  him  an  opportunity  to  take 
paper  of  comparatively  small  denominations  signed  by 
many  different  acceptors. 

15 


Foreign   Trade  Banking   Corporation 

It  promises  a  freer  and  steadier  use  of  discount- 
ing facilities. 

It  increases  borrowing  possibilities,  strengthen- 
ing the  bank's  customers'  credit. 

It  Increases  availability  of  assets. 

Negotiability  of  the  eligible  Trade  Acceptance  is  as- 
sured by  the  readiness  with  which  it  can  be  rediscounted 
at  the  Federal  Reserve  Bank. 

It  provides  a  high-class  secondary  reserve. 


Advantages  to  the  Seller 

Employment  of  the  Trade  Acceptance  is  of  ad- 
vantage to  the  seller  of  goods,  because  resulting 
economies  and  fuller  utilization  of  capital  place 
him  in  a  better  competitive  position. 

It  enables  the  seller  to  eliminate  abuse  of  credit 
by  the  buyer. 

Transactions  are  concluded  promptly  and  definitely,  do- 
ing away  with  evils  such  as  unearned  discount,  unwar- 
rantable extensions,  etc. 

It  puts  on  the  buyer  responsibility  of  proving 
correctness  of  the  transaction. 

The  buyer  by  accepting  supplies  an  acknowledgment 
that  he  finds  the  account  in  order. 

Possibilities  of  dispute  and  litigation  are  mini- 
mized. 

It  lessens  expense  of  collections. 

16 


Americans  Pioneer  Discount  Bank 

If  the  Acceptance  is  made  payable  at  the  seller's  bank, 
collection  requires  no  effort  on  the  seller's  part.  It 
becomes  a  detail  of  banking  machinery. 

It  reduces  losses  on  bad  accounts. 

The  Acceptance  acts  as  a  check  on  customers'  tendency 
to   overbuy. 

It  helps  the  seller  economically  to  extend  the 
accommodation, 

Practically  without  impairment  of  his  capital,  because 
employment  of  the  Acceptance,  by  virtue  of  its  eligible 
quality,  enables  each  transaction  substantially  to  finance 
itself. 

It  does  away  with  "dead"  capital. 

The  seller's  capital  is  not  tied  up  in  ' 'frozen"  accounts. 
It  is  relieved  from  unremunerative  financing  of  cus- 
tomers. 

It  is  transformed  into  two-name,  self-liquidating  com- 
mercial paper  readily  convertible  into  cash  at  low  dis- 
count rates,  whereas  book  accounts  must  usually  be  sold 
at  a  high  rate. 

It  thus  lessens  need  for  working  capital. 

And  consequently  the  ratio  of  earnings  to  capital  actu- 
ally employed  is  increased. 

It  provides  a  reliable  secondary  cash  reserve. 

The  seller  thus  having  his  capital  in  proper  liquid  form 
is  fortified  to  meet  unexpected  business  depression. 

It  enables  the  seller  to  conduct  his  business  more 
systematically. 

Because  of  certainty  of  regular  influx  of  money  and 
assured  borrowing  power. 

Places  him  in  better  shape  to  keep  track  of  his  outstand- 
ing obligations. 

17 


Foreign  Trade  Banking  Corporation 

Advantages  to  the  Buyer 

The  Trade  Acceptance  benefits  the  buyer  of 
goods  because 

It  benefits  his  business  reputation,  strengthen- 
ing his  credit  with  sellers,  indicating 

That  he  does  not  overbuy. 

That  he  is  prepared  to  meet   obligations  promptly  at 

maturity. 

That  he  is  entitled  to  consideration  as  a  preferred  buyer. 

It  enhances  value  of  his  paper  when  he  borrows. 

When  negotiated,  it  will  benefit  by  the  best  preferential 
discount  rates,  because  of  his  proved  willingness  to  make 
prompt  payment  in  assuming  the  obligation  of  accept- 
ances. 

It  frees  his  transactions  with  the  seller  from 
dependence  on  special  favors. 

It  makes  for  systematic,  efficient  routine  in  his 
business,  eliminating  waste  effort. 

It  automatically  prevents  accumulation  of  over- 
due accounts. 

It  puts  a  check  on  overextension  in  buying. 

General  Advantages 

Compared  with  the  open  book  account,  cash  dis- 
count and  single-name  paper  methods  of  conduct- 
ing business  transactions,  the  use  of  the  Trade 
Acceptance  is  more  sound  and  economical,  because 
it  is  founded  on  a  logical  basis. 

18 


Americans  Pioneer  Discount  Bank 

The  Trade  Acceptance  bears  evidence  on  its  face 
of  the  rational  relationship  of  buyer,  seller  and 
lender,  and  of  its  security. 


The  Trade  Acceptance  improves  trade  relations 
between  buyer  and  seller  by  clearly  defining  their 
respective  obligations. 


It  enables  invested  capital  to  do  more  than  its 
present  volume  of  work  with  less  risk. 


It  lowers  borrowing  rates  because  of  the  produc- 
tion of  standard  paper,  elimination  of  unnecessary 
risk  and  because  the  Federal  Eeserve  Board  gives 
to  it  preferential  rediscount  rates. 


It  plays  an  important  part  in  providing  national 
financial  commercial  preparedness. 


"In  the  entire  list  of  methods  and  expe- 
dients commonly  employed  in  the  class  of  busi- 
ness which  is  conducted  upon  a  credit  basis,  I 
know  of  none  more  safely  founded,  more  logi- 
cally arranged,  more  economical  in  operation 
or  better  calculated  to  protect  the  proper  in- 
terests of  all  parties  concerned  than  the  Trade 
Acceptance. ' ' 

Lewis  E.  Pierson. 


19 


The  Acceptance   a   Promotor  of  Foreign 

Trade 

The  value  of  the  Acceptance  in  foreign  business 
is  well  recognized.  The  regulation  of  the  Federal 
Keserve  Board,  providing  for  Acceptances  to  fur- 
nish dollar  credits,  has  heightened  its  advantage  to 
the  American  exporter  and  importer. 

Its  use  in  foreign  trade  meets  the  difficulties  of 
manufacturers  in  the  United  States  who  have  been 
hampered  by  inability  to  grant  credits  as  liberally 
as  their  foreign  competitors.  It  practically  solves 
the  long-credit  problem. 

Through  the  use  of  Acceptances,  the  exporter 
avoids  the  necessity  of  locking  up  his  capital. 

He  obtains  immediate  reimbursement  for  the 
value  of  his  shipment  by  negotiating  the  draft.  He 
is  thus  enabled  promptly  again  to  use  the  money 
for  a  new  transaction. 

Acceptances  arising  from  foreign  trade  have 
given  rise  to  a  vast  amount  of  financing  formerly 
carried  on  chiefly  through  London  but  growing 
rapidly  in  New  York. 


20 


Americans  Pioneer  Discount  Bank 
Supplying  a  Gfroiving  Need 

London  has  benefited  by  the  operation  of  dis- 
count banks  especially  devoted  to  this  form  of 
business.  In  America,  the  Foreign  Trade  Banking 
Corporation,  as  a  pioneer  in  the  field,  seeks  to 
supply  a  similar  need. 

•Service  for  the  purpose  of  building  up  and  hold- 
ing our  foreign  patronage,  is  at  present  much  under 
discussion.  While  educational  work  relative  to 
proper  packing  and  similar  features  is  important, 
these  after  all  are  questions  of  detail. 

Of  the  greatest  importance  to  help  us  achieve  this 
most  desirable  result  is  the  matter  of  credits.  A 
more  elastic  credit  system,  in  which  the  Acceptance 
and  the  discount  bank  are  vital  elements,  together 
with  adequate  shipping  facilities,  is  what  this  coun- 
try chiefly  needs  to  maintain  its  recently  won 
supremacy  as  an  exporter. 


21 


An  American  Discount  Market 

Opportunity  for  the  establishment  of  an  Ameri- 
can discount  market  has  been  opened  by  the  pro- 
visions of  the  Federal  Keserve  Act  and  its  amend- 
ments. 

The  Acceptance  is  acknowledged  to  be  "the  standard 
form  of  paper  in  the  world  discount  market.''  Its  en- 
joyment of  the  purchase  and  rediscount  privileges  by 
Federal  Reserve  Banks  under  the  rules  of  eligibility  is 
an  important  factor  in  the  development  of  a  broad  dis- 
count market  here. 

The  regulation  permitting  purchase  by  the  Federal  Re- 
serve Banks  of  Acceptances  drawn  for  the  purpose  of 
furnishing  dollar  exchange  has  been  an  incentive  to  a 
wider  use  of  this  kind  of  credits  in  foreign  trade  trans- 
actions, with  accompanying  demands  for  larger  market 
facilities  for  Acceptances. 

Improvement  in  the  machinery  of  financing  for- 
eign trade  in  this  respect  is  the  more  desirable  as 
the  war  promises  to  usher  in  a  period  of  exacting 
international  commercial  competition. 

In  this  situation  is  marked  out  the  place  for  a 
bank  that  devotes  its  energies  particularly  to  the 
business  of  discounting  Trade  and  Bankers'  Ac- 
ceptances. 


82 


Foreign  Trade 

banking  Corporation 

Incorporated  under  the  Banking 
Laws  of  the  State  of  New  York 

35  WaU  Street  New  York 

Capital  and   Surplus    -    $2,200,000 

OFFICERS 
George  A.  Gaston      -        -        -        -       President 
Max  May  -  Vice-President  &  Managing  Director 
William  T.  Law        .        -        -        _        Secretary 

DIRECTORS 

George  A.  Gaston    -    President,  Gaston  Williams 

&  Wigmore,  Inc. 
Harry  T.  Hall        -        Vice-President,  Merchants 

National  Bank 
Max  May        -        -        Vice-President  and  Man- 
aging Director 
Wade  Robinson        -  President,  Wade  Robinson 
&  Co.,  Marine  Underwriters 
Benjamin  S.  Guinness,  Ladenburg,Thalmann&Co. 
Director,  New  York  Trust  Co, 

Bank,  Bankers'  and  Trade  Acceptances 

Domestic  &  Foreign  Shipments  of  Merchandise  Financed 

Commercial  &  Travelers'  Letters  of  Credit  Issued 

Foreign  Exchange  Bought  and  Sold 


'  'America  V  Pioneer  Discount  Bank' 


UNIVERSITY  OF  CALIFORNIA   LIBRARY 
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